Pensions: a quick guide

Employers are starting to talk about having to set up pension schemes. We’re not pension experts and we’re not going to waste your time getting involved – but we thought we would offer some tips and advice.

An estimated 770,000 UK employers with between 1 and 49 employees must provide and contribute into a pension for their workers under the government’s automatic enrolment scheme over the next two years.

You should receive a letter from the Pensions Regulator telling you about this, with most small employers being phased into the system between now and April 2017. You can find out your ‘staging’ date – the deadline by which your staff must be enrolled – using your PAYE reference online at www.thepensionsregulator.gov.uk/employers.

Who does this cover?

If you employ at least one member of staff (even if they are family, a nanny or carer) and pay them via a payroll then you have to enrol them.  However they have to be aged between 22 and state pension age, as well as earning above the tax-free personal allowance.  For 2015-16 this is £10,600 or £833 a month or £192 a week.

If part-time people work extra hours

Those who earn less still have the right to join a pension plan but do not have to be automatically enrolled.  Bear in mind, if you pay someone extra for working more hours in just one month and this tips them over the threshold, then you will have to enrol them into a pension for that month – even if the annual salary falls below £10,600.

Not employed: agency and freelance workers

If you pay someone through an agency or they are self-employed, you are not responsible for enrolling them, although an agency may pass on the costs via their fees to you.

Employees with a second job

If an employee has earnings from other jobs that pushes them over the threshold, the rules apply only to what you pay them.

What’s the risk if I ignore this?

If you don’t comply you could be fined £400, then a further £50 per day until you do.  There are 33 responsibilities with which you must comply and these range from nominating a contact, enrolling employees and keeping records. There is also the task of picking a pension scheme.

It may be worth speaking with your accountant, financial advisor or a pensions specialist to ensure you are ready for auto-enrolment. Also, there is plenty of information to help you at www.thepensionregulator.gov.uk/employers.

By Melissa